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In this article, we discuss the 10 best growth stocks to buy right now based on billionaire growth investor Philippe Laffont's Q1 portfolio. If you want to skip our detailed analysis of these stocks, go directly to the 5 Best Growth Stocks to Buy Right Now.
Philippe Laffont, the billionaire who runs New York-based hedge fund Coatue Management, is one of the few money managers who have successfully navigated the stock volatility associated with growth stocks in the past few years and provided investors with consistently handsome returns. Founded in 1999, the fund now oversees more than $18 billion in assets under management and boasts an average annual return of over 10% in the past decade. Laffont also controls a venture capital fund that invests in tech-related startups.
Some of the top holdings in the Coatue's Q1 portfolio are Snowflake Inc. (NYSE: SNOW), The Walt Disney Company (NYSE: DIS), and Tesla, Inc. (NASDAQ: TSLA). Snowflake Inc. (NYSE: SNOW) only went public in September last year, raising more than $3 billion in a record offering that valued the company at over $33 billion. Since then, the share price of the cloud-based data storage provider has more than doubled and the firm now has a market cap of over $70 billion. As digital offerings explode, Snowflake Inc. (NYSE: SNOW) still has room to climb even higher.
One of the unexpected stocks in the otherwise tech-specific portfolio of the fund is The Walt Disney Company (NYSE: DIS), the California-based mass media and entertainment firm. One of the reasons why Laffont is bullish on the firm is Disney+, the digital video streaming service owned by the media firm that has amassed more than 100 million users in just over a year. The Walt Disney Company (NYSE: DIS), which owns some of the most famous theme parks around the world, has also benefited from the reopening of the economy.
Most growth stock lists on Wall Street include Tesla, Inc. (NASDAQ: TSLA), the electric vehicle maker that went on a record rally through 2020, with share price soaring 700% before taking a breather towards the end of April this year. Tesla, Inc. (NASDAQ: TSLA) is among the top holdings of Coatue Management, although Laffont has trimmed the stake of the fund in the company by almost a quarter in the first three months of 2021 compared to the fourth quarter of 2020 amid a lull in the market around crypto-linked growth stocks.
Laffont is among the handful of hedge fund managers who have heavily backed tech-focused disruptors in every sector of the economy, fundamentally altering market dynamics in their favor. The entire hedge fund industry is feeling the reverberations of the changing financial landscape. Its reputation has been tarnished in the last decade, during which its hedged returns couldn’t keep up with the unhedged returns of the market indices. On the other hand, Insider Monkey’s research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 124 percentage points since March 2017. Between March 2017 and February 26th 2021 our monthly newsletter’s stock picks returned 197.2%, vs. 72.4% for the SPY. Our stock picks outperformed the market by more than 124 percentage points (see the details here). We were also able to identify in advance a select group of hedge fund holdings that significantly underperformed the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 16th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to. You can subscribe to our free newsletter on our homepage to receive our stories in your inbox.
Philippe Laffont of Coatue Management
With this context in mind, here is our list of the 10 best growth stocks to buy right now. These were selected from the investment portfolio of Coatue Management, the investment firm led by Philippe Laffont that has averaged record returns by betting on growth stocks over the years. These holdings were the top ones in the Coatue portfolio at the end of the first quarter of 2021.
Best Growth Stocks to Buy Right Now
10. PayPal Holdings, Inc. (NASDAQ: PYPL)
Number of Hedge Fund Holders: 143
PayPal Holdings, Inc. (NASDAQ: PYPL) is an online payments company. Over the years, the firm has become the platform of choice for those wishing to make cross-border transactions at low fees. It boasts a user base of close to 400 million people. On May 26, a few months after it allowed users to make transactions in cryptocurrencies, the company announced that it would soon allow third-party wallet transfers of Bitcoin, the most popular cryptocurrency. The stock has returned more than 89% to investors in the past year.
Coatue Management owns close to 3 million shares in PayPal Holdings, Inc. (NASDAQ: PYPL) worth over $713 million. These represent 3.9% of their portfolio. In the first quarter of 2021, the fund trimmed stake in the payments firm by close to 58% compared to the previous quarter.
At the end of the first quarter of 2021, 143 hedge funds in the database of Insider Monkey held stakes worth $14.7 billion in PayPal Holdings, Inc. (NASDAQ: PYPL), down from 147 in the preceding quarter worth $15.9 billion.
Just like Snowflake Inc. (NYSE: SNOW), The Walt Disney Company (NYSE: DIS), and Tesla, Inc. (NASDAQ: TSLA), PayPal Holdings, Inc. (NASDAQ: PYPL) is one of the best growth stocks to buy right now.
“For the full year 2020, one of the top performers was PayPal, which we purchased in 2019, the company continues to take market share in digital payments and has seen an acceleration in user adoption and engagement, especially within their “silver tech” or older user demographic. We expect many more years of ongoing double-digit growth from their various business segments and new initiatives.”
9. Sea Limited (NYSE: SE)
Number of Hedge Fund Holders: 98
Sea Limited (NYSE: SE) is a technology company that operates out of Singapore. It is ranked ninth on our list of 10 best growth stocks to buy right now. On June 10, investment advisory Bank of America upgraded the stock to Buy from Neutral, revising the price target $340 from $260 on the back of growth expectations for Shopee, the ecommerce platform owned by the Singaporean firm, and the sales of a popular video game that that is being turned into a social gaming platform. Sea Limited (NYSE: SE) has returned more than 164% to investors in the past year.
Sea Limited (NYSE: SE) comprises 3.92% of the investment portfolio of Coatue Management, which holds 3.2 million shares of the company worth $715 million. The hedge fund has increased stake in the firm by 2% in the first three months of 2021 compared to the fourth quarter of 2020.
At the end of the first quarter of 2021, 98 hedge funds in the database of Insider Monkey held stakes worth $10.4 billion in Sea Limited (NYSE: SE), down from 115 the preceding quarter worth $10.8 billion.
Just like Snowflake Inc. (NYSE: SNOW), The Walt Disney Company (NYSE: DIS), and Tesla, Inc. (NASDAQ: TSLA), Sea Limited (NYSE: SE) is one of the best growth stocks to buy right now.
“Sea Ltd (SE): When I wrote our Q4 2019 letter about Shopee launching a Brazilian business, it seemed very few investors or competitors knew or cared.
A year ago, I wrote: “This is the first test for the ecommerce marketplace outside of its Southeast Asia home base. Will the platform’s fun and addicting features overcome a lack of local knowledge and presence? It’s hard to predict consumer behavior and how accepting users will be to a platform – especially one that’s a foreign culture and 10,000 miles away. The only way to know is to experiment and watch the results closely.
Empirically though, it seems that what consumers find entertaining in Asia, generally translates well to Brazil (and Shopee really is as much an entertainment platform, as an ecommerce one).
For example, just look at the top 10 free apps in Brazil. Two are utility messaging apps, so we’ll ignore those (WhatsApp and
Facebook Messenger). But among the remaining eight apps, they’re all entertainment based and overwhelmingly Asian. Four are from China (Kwai, TikTok, VStatus, TikTok Lite), two from Singapore (Free Fire and Shopee, both Sea Ltd apps), and one from the US (Instagram). The commonality is that all these apps are experts at creating addictive habits, as evidenced by their personalized recommendations, avg usage time, number of logins per day per user, etc.” (LINK)
I distinctly remember having conversations with several Brazilian hedge funds as recently as last summer who were investors in Sea Ltd. When the topic of Brazil came up, many of them didn’t even know Shopee was operating in their own backyard!
Part of this stems from the fact that Shopee tends to enter markets with a bottoms-up approach. Instead of going after urban, high disposable income users first (of which these hedge fund professionals were certainly part of), they tend to initially go after those with only a few hundred or thousand USD of annual disposable income. These users tend to reside outside of major cities, have fewer choices for recreational pastime (thus turning to gaming, short-form videos, or online shopping for entertainment), can’t afford “branded” items and thus are willing to take a chance on cheaper (but still good quality) un-branded goods, and are willing to wait several weeks for it to be shipped from Asian factories.
Anyone who has studied Pinduoduo (Nasdaq: PDD) in China, will recognize this strategy and just how large of a market these consumers can be. As Shopee gains popularity in a market, they will then start to slowly move “up-market”, and cater to more urban and higher-income consumers. They’ve already followed this exact strategy in Southeast Asia, and this is the point they’ve reached in Brazil over the past year.
Shopee made its first big social push last fall, hiring over a dozen influencers with 1M+ followers to promote Shopee’s Black Friday sale (LINK). In addition, they also released their first Brazilian TV commercial last year.
It seems these initiatives are working. Shopee now consistently ranks in Brazil’s top 5 apps (while sister app Free Fire, is also the #1 grossing app). In addition, Shopee also moved Pine Kyaw (LINK), one of their key lieutenants in Vietnam who successfully helped Shopee fight off competitors (Tiki, Lazada, Sendo), to Brazil last May.
For the past year, the company has insisted publicly that the Brazil initiative is still a “test” initiated by the cross-border team. While this may have been true at first, it’s clear this is no longer a “test”, but rather a strategic focus for Shopee and posed to be the next battleground. It’s likely the company has chosen to remain tight-lipped so as to not tip off competitors, while they quietly “position the troops” to prepare for a larger assault.
For example, Shopee is also starting to allow local sellers to join the platform and list their local inventory (LINK). By definition, this is no longer a cross-border initiative (i.e. allowing their Southeast Asian sellers to sell to Brazilian consumers, and then shipping the goods directly from Asia. This is the model Aliexpress follows.).
This is the start of a localized marketplace. And similar to their early days in Southeast Asia, the goal is to reach the “tipping point” at which the marketplace becomes self-sustainable (this concept is discussed in our Q1 2019 letter; LINK). The weapons of choice in reaching critical mass: social media influencers to drive rust & awareness, free shipping & discounts to acquire / convert these new customers, and gamification of shopping to drive continued engagement, habit building, and repeat purchases.
Given all of this, and the strong (but early) traction in the local Shopee Brazil marketplace, investors need to keep an eye on this development. It is the smallest GMV contribution among Shopee’s countries currently, but a large inherent call option in the valuation. Something that so far, seems greatly underappreciated. I suspect at some point in the near future, Shopee’s management team will disclose more on the initiative, and at which point investors will be surprised by how Shopee managed to quietly build one of the largest marketplaces in Brazil.”
8. Uber Technologies, Inc. (NYSE: UBER)
Number of Hedge Fund Holders: 130
Uber Technologies, Inc. (NYSE: UBER) is a technology company with stakes in the ride-hailing and food delivery businesses. The company’s shares have offered investors returns exceeding 53% over the course of the past twelve months. It is placed eighth on our list of 10 best growth stocks to buy right now. On June 16, investment advisory Evercore maintained an Outperform rating on the firm with a price target of $74, implying an upside potential of about 50%. A survey into the ride-hailing market by Evercore revealed that Uber Technologies, Inc. (NYSE: UBER) was the clear leader in the industry.
Coatue Management has, however, trimmed its stake in Uber Technologies, Inc. (NYSE: UBER) by 37% in the first quarter of 2021 when compared to their holding to the last three months of 2020. It still owns 13.3 million shares in the firm worth over $727 million.
Out of the hedge funds being tracked by Insider Monkey, California-based investment firm Altimeter Capital Management is a leading shareholder in Uber Technologies, Inc. (NYSE: UBER) with 28 million shares worth more than $1.5 billion.
Just like Snowflake Inc. (NYSE: SNOW), The Walt Disney Company (NYSE: DIS), and Tesla, Inc. (NASDAQ: TSLA), Uber Technologies, Inc. (NYSE: UBER) is one of the best growth stocks to buy right now.
7. Amazon.com, Inc. (NASDAQ: AMZN)
Number of Hedge Fund Holders: 243
Amazon.com, Inc. (NASDAQ: AMZN) is a technology company that operates one of the biggest ecommerce platforms in the world. On June 18, the company signed a deal with Ferrari to become the official cloud, machine learning, and artificial intelligence provider for the car company. It has a market cap of over $1.7 trillion and posted more than $386 billion in revenue last year. The company’s shares have returned more than 31% to investors over the past twelve months. It is placed seventh on our list of 10 best growth stocks to buy right now.
Amazon.com, Inc. (NASDAQ: AMZN) is one of the top holdings of Coatue Management, which holds 265,455 shares of the tech giant worth $821 million, representing 4.5% of its investment portfolio. The hedge fund has increased its stake in Amazon by 27% in the first quarter of 2021 compared to the previous quarter.
Out of the hedge funds being tracked by Insider Monkey, Chicago-based investment firm Citadel Investment Group is a leading shareholder in Amazon.com, Inc. (NASDAQ: AMZN) with 3.3 million shares worth more than $10.5 billion.
Just like Snowflake Inc. (NYSE: SNOW), The Walt Disney Company (NYSE: DIS), and Tesla, Inc. (NASDAQ: TSLA), Amazon.com, Inc. (NASDAQ: AMZN) is one of the best growth stocks to buy right now.
“Amazon (AMZN): We sold our last remaining stake in Amazon this quarter. Amazon was our longest-running investment holding, after having originally purchasing it at the inception of Hayden in 2014, at a price of ~$317.
I gave some details of how Amazon has progressed over these past 6.5 years in last year’s Q2 2020 letter, which partners can find here (LINK). The company has executed amazingly well over this tenure, with revenues up ~3.3x and since our initial purchase, and reported operating income up ~30x over that period.
Generally, I believe there are three reasons to sell an investment: 1) we recognize our initial thesis is wrong (sell out as quick as possible), 2) we have a significantly higher returning opportunity to redeploy the capital into (sell-down to fund the new investment), or 3) the company is maturing and hitting the top part of it’s S-curve / business lifecycle, so the business has fewer places to reinvest its capital internally. As such, the future returns will likely be lower than the past. This investment thus becomes a “source of capital” in the future, as we fund earlier-stage investment opportunities." (Click here to read the full text)
6. Square, Inc. (NYSE: SQ)
Number of Hedge Fund Holders: 92
Square, Inc. (NYSE: SQ) is a digital payments company based in California. The stock has offered investors returns exceeding 141% over the past year. The share price of the firm has dipped in recent weeks as growth stocks stumble after a record bull run. However, the payments company has been busy expanding. On May 26, the company struck an agreement with event organizer Noble for online payment processing at live events. On May 24, media reports indicated that the firm was considering offering checking and saving accounts to select clients.
Coatue Management owns more than 3.8 million shares in Square, Inc. (NYSE: SQ) worth over $880 million. This represents 4.82% of the investment portfolio of the hedge fund. By March 2021, the fund had trimmed stake in the payments company by 37% compared to December 2020.
At the end of the first quarter of 2021, 92 hedge funds in the database of Insider Monkey held stakes worth $9.2 billion in Square, Inc. (NYSE: SQ), up from 89 the preceding quarter worth $8.8 billion.
Just like Snowflake Inc. (NYSE: SNOW), The Walt Disney Company (NYSE: DIS), and Tesla, Inc. (NASDAQ: TSLA), Square, Inc. (NYSE: SQ) is one of the best growth stocks to buy right now.
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Disclose. None. 10 Best Growth Stocks to Buy Right Now is originally published on Insider Monkey.